Proponents had called the project a key part of California's plan to cut its overuse of Colorado River water by 2015. The state is continuing to study other options for lessening its reliance on the river.

Opponents, led by Sen. Dianne Feinstein of Calif., had warned the project would damage the fragile desert environment. However, the Department of the Interior had approved the proposal last month, stating environmental damage could be prevented with close monitoring.

Cadiz and the Metropolitan Water District, the state's largest with 17 million customers, would have jointly owned the project and split the $150 million cost.

The plan called for the storage of surplus Colorado River water in an aquifer. The district would have had the right to buy water in the aquifer from Cadiz.

Cadiz stood to earn $500 million to $1 billion over 50 years from the project.